Tanners set to receive Tk270cr loan for rawhide procurement

Tanners will get about Tk270 crore loans from banks as capital aid to procure and preserve rawhides during the upcoming Eid-ul-Adha, the peak season for collecting skins and rawhides of sacrificial animals, according to central bank sources. 

The loan limit, set by the Bangladesh Bank, is Tk10 crore higher than last year and will be disbursed through 12 public and private banks.

Of the total amount, four state-owned banks — Sonali, Janata, Rupali and Agrani — will lend the maximum amount and the rest will be disbursed by private banks.

Like previous years, the Bangladesh Tanners Association (BTA) wrote to the commerce ministry, requesting higher loan support than the previous year.

Last year, traders sought a loan of at least Tk500 crore but received only half of that amount, Tk259 crore. However, the loan amount was substantially higher in 2022, Tk443 crore.

Around one crore animals are sacrificed during Eid-ul-Adha, the second-largest religious festival for Muslims. The market value of this rawhide collected during this season amounts to about Tk2,500 crore.

In a meeting, presided over by Industries Minister Nurul Majid Mahmud Humayun, on 12 May, BTA President Shaheen Ahmed said, "The usual allocation of loans for the purchase and preservation of rawhide annually does not meet the actual demand. The minister has assured us that he will communicate with the central bank to enhance the credit facility."

A senior Bangladesh Bank official told TBS, "We have reached out to the banks, and they have pledged to provide a loan of Tk270 crore this year."

"Tanneries frequently fail to repay loans, resulting in a considerable number of defaults in this sector. Consequently, banks exhibit reluctance to invest extensively in this domain," the official said.

Shaheen Ahmed said, "As of now, the outstanding debt of the leather sector stands at Tk8,000 crore. The Crescent Group alone accounts for Tk 5,000 crore, while all other tanneries collectively owe Tk 3,000 crore. This year, we have rescheduled Tk170 crore loans."

"Hide is a perishable product, which needs to be collected and preserved quickly. Seasonal traders collect huge amounts of rawhides from different parts of the country during Eid — a process which requires a lot of effort and money," he said.

"Usually, tannery owners do business with their own working capital, but they need more cash during Eid-ul-Adha when millions of animals are sacrificed," the BTA president added.

BTA is the apex body of leather sector entrepreneurs. Industry owners in this sector collect and process rawhides in tanneries.

After processing, some lathers are sold to industries linked to the leather industry and the rest are exported abroad.

According to the BTA, the organisation currently has around 800 members, including tannery owners and commercial exporters. There are 1,866 large and medium leather merchants across the country.

Beyond this, there are many agents who collect animal hides during Eid-ul-Adha from seasonal entrepreneurs.

Rawhides are collected and stored in the factories of Posta in the capital, Railway Bazar in Natore, Rajarhat in Jashore, Palashbari in Gaibandha, Taraganj in Rangpur, Naogaon, Mymensingh, Tangail, Kishoreganj, Cumilla, Chattogram, Aminbazar and Tongi-Gazipur.

According to the Centre for Policy Dialogue (CPD), there are about 200 tanneries in Bangladesh, including 127 in Tannery Industrial Estate, Savar, Dhaka.

Tanners have voiced grievances regarding the struggles faced by the leather industry since 2017. One contributing factor is the relocation of the tannery industry to Savar. Additionally, in recent years, a significant portion of loans extended to the leather industry has been rescheduled, hindering the sector's recovery from losses.

Speaking anonymously, a former leader of the BTA, told TBS, "Tannery owners are not receiving the anticipated loan amounts. Banks are adjusting (rescheduling loans) the amounts lent against previous years' loans."

"Before 2017, the majority of businessmen in this sector were not defaulting. Many lacked the capacity to transition to the leather industry in Savar. Therefore, our plea to the government is to waive the interest on loans for 2017-2019."

Leather exports decline by over 14%

In 2017, the High Court ordered the transfer of tanneries from the capital's Hazaribagh to Sava's leather industrial city. Compliance issues and transfers have negatively impacted the sector, resulting in reduced exports.

However, leather exports are gaining momentum in recent years.

During the eleven months of the current financial year 2023-24 (July-May), exports of leather goods totalled $961 million, marking a decline of 14.17% compared to the corresponding period in the previous financial year. The leather industry had set an export target of $1,350 million for the current financial year.